Analyst: Fox Could Get Around $750 Million in New Syndication Revenue After 'Simpsons' Cancellation

The original syndication deal prevented Fox from selling the show to cable networks and online distributors, says RBC Capital Markets' David Bank, adding that this could add 10 cents-plus per share in value for News Corp. shareholders.

NEW YORK - Ironically, a potential cancellation of animated hit show The Simpsons could open up additional revenue to the tune of around $750 million for News Corp. and its Fox unit, RBC Capital Markets analyst David Bank said late Tuesday. Plus, it could add to the company's stock price by boosting financials, he said.

"The original syndication deal (struck about 17 years ago) prevented Fox from selling the show into any other distribution mechanism but local broadcast," he wrote in a research note entitled "D’oh! Possible Cancellation Of The Simpsons Could Result In Windfall For News Corp."

"Ironically, the cancellation of the show would allow News Corp. to finally sell off-network syndication rights into cable channels (and potentially to online distributors)," he explained, calling the potential windfall for Fox "massive."

After all, cable was "relatively insignificant" in terms of off-network syndication at the time of the original deal, Bank said. "But over the ensuing years, cable grew to be as big an opportunity as (if not bigger than) local broadcast."

Fox's TV studio had said earlier on Tuesday that the financial model of the Simpsons wasn't sustainable anymore. A report said the studio was looking to cut voice actors' salaries by 45 percent.

Canceling The Simpsons could allow Fox to "essentially abrogate" the original syndication agreement, "potentially allowing for about $750 million of incremental content monetization," Bank said.

He estimated that cable syndication and maybe online distributors could fetch $1 million-$2 million per episode in what is a library of 506 episodes.

"We believe Fox would probably only have the rights for about 15-17 seasons initially (with the rest tied-up in the original broadcast syndication cycle) and we’d imagine Fox would spread the delivery of episodes across a number of years," Bank suggested.

Overall, this could create 10 cents per share-plus in stock value for News Corp. shareholders when assuming $1.5 million per episode and 60 percent profit margins, according to the analyst. A lack of a positive resolution of a labor dispute between Simpsons cast members and the Fox TV studio and a potential resulting cancellation of the show "could be more positive for News Corp. stock than one might think," Bank concluded.